Loans receivable, net

12 Months Ended

Dec. 31, 2019

4. Loans receivable, net

Loans receivable originated and retained by the Group consist of the following:


	As of December 31,
	2018			2019
	RMB			RMB
Loans (adjusted, Note 2(ah))		2,405,489			5,124,376
Allowance for loan losses (adjusted, Note 2(ah))		(74,381	)		(316,124	)

Loans receivable, net		2,331,108			4,808,252

As of December 31, 2019 and 2018, the entire loans receivable balance represents the outstanding loans made to the borrowers from consolidated trusts and loans held by subsidiaries of the Group. As part of the Group’s efforts to develop new product offerings for institutional funding partners, the Group has established a series of trusts administrated by third-party trust companies. These trusts make loans solely to borrowers referred the Group to provide returns to the trust beneficiaries. As such, the Group has power to direct the activities of the trusts. Also, the Group is either the sole beneficiary of certain trusts or has the obligation to absorb losses or the right to receive residual benefits from certain trusts that could potentially be significant to these trusts. As a result, the Group is considered the primary beneficiary of the trusts and their assets, liabilities, results of operations and cash flows are consolidated accordingly.

The following table sets forth the activity in the allowance for loan losses for the years ended December 31, 2017, 2018 and 2019.


	For the Years Ended December 31,
	2017			2018			2019
	RMB			RMB			RMB
Beginning balance		1,084			47,670			74,381
Current period provision		65,299			204,442			372,066
Current period reversal		(18,713	)		(11,693	)		(72,562	)
Current period write off		—			(166,038	)		(57,761	)

Ending balance		47,670			74,381			316,124

The following table sets forth the

aging

of loans as of December 31, 2018 and December 31, 2019:


	1-89 days past due		90-119 days Past due		120-149 days Past due		150-179 days Past due		Total past due		Current		Total loans receivable
December 31, 2018		59,685		11,173		7,739		7,040		85,637		2,319,852		2,405,489

December 31, 2019		283,354		51,775		45,321		40,034		420,484		4,703,892		5,124,376

As of December 31, 2018 and 2019, loans receivable amounting to RMB25,952 and RMB137,130 were in non-accrual status with no loans receivables accruing interest 90 days past due. Interest income for non-accrual loans receivable is recognized on a cash basis. For the year ended December 31, 2017, 2018 and 2019, interest income earned from non-accrual loans receivable were not material.

As prescribed in ASC Topic 310, credit losses shall be deducted from the allowance for credit losses and written off in the period deemed uncollectible. Uncollectible generally means loans remain past due after all commercially reasonable means of recovering the loan balance have been exhausted. As disclosed in note 2(n), the Company writes-off the loans receivable and the related allowance when the loans receivables are delinquent for 180 days or more.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that will probably incur. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Group’s past loan loss history, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, composition of the loan portfolio, current economic conditions and other relevant factors. The allowance is calculated at portfolio-level since the loans portfolio is typically of smaller balance homogenous loans and is collectively evaluated for impairment. In estimating the probable loss of the loan portfolio, the Group also considers qualitative factors such as current economic conditions and or events in specific industries and geographical areas, including unemployment levels, trends in real estate values, peer comparisons, and other pertinent factors such as regulatory guidance.

The following table sets forth the total assets, liabilities, results of operations and cash flows of the above trusts, which are included in the Group’s consolidated financial statements.


	As of December 31,
	2018		2019
	RMB		RMB
Restricted cash		303,667		799,646
Loans and other receivable		2,507,878		5,092,609

Total assets		2,811,545		5,892,255

Funds payable to investors of consolidated trusts		2,808,506		5,887,693
Taxes payable		3,039		4,562

Total liabilities		2,811,545		5,892,255


	For the Years Ended December 31,
	2017			2018			2019
	RMB			RMB			RMB
Net revenue		(28,372	)		(164,082	)		(243,795	)
Net loss		(44,396	)		—			—

Net cash used in operating activities		(16,024	)		(18,008	)		(78,339	)
Net cash used in investing activities		(615,971	)		(1,624,784	)		(1,290,842	)
Net cash provided by financing activities		675,654			1,901,684			1,865,160
Net increase in cash, cash equivalents and restricted cash		43,659			258,892			495,979
Cash, cash equivalents and restricted cash at beginning of year		1,116			44,775			303,667

Cash, cash equivalents and restricted cash at end of period		44,775			303,667			799,646

The following table sets forth the breakdown of funds payable to investors of consolidated trusts between the institutional funding partners and the Group as of December 31, 2018 and December 31, 2019:


	As of December 31,
	2018				2019
	Institutional funding partners		The Group		Institutional funding partners		The Group
Principal invested		1,493,916		1,093,610		3,529,785		1,316,130
Accrued interest/residual interest		11,993		208,987		130,698		911,080

Total		1,505,909		1,302,597		3,660,483		2,227,210